IMF Approves $3 Billion Emergency Loan for Pakistan as Forex Reserves Hit Critical Low — Strict Conditions Attached
The International Monetary Fund's executive board approved a $3 billion emergency standby arrangement for Pakistan as the country's foreign exchange reserves fell to a 4-month import cover, threatening to derail debt repayments and imports of essential goods.
Representative image. Photo: Nationalism News
The International Monetary Fund's Executive Board approved a 24-month, $3 billion Extended Standby Arrangement for Pakistan on Friday, providing the cash-strapped South Asian nation with emergency fiscal support as its foreign exchange reserves fell to $8.3 billion — barely enough to cover 4 months of imports.
The approval came after weeks of tense negotiations between Pakistani officials and IMF teams in Washington. The deal requires Pakistan to reduce its fiscal deficit from 7.4% to 5.2% of GDP by 2026-27, increase tax revenue by Rs 3.2 trillion, cut energy subsidies by 40% and allow the Pakistani rupee to float freely.
Finance Minister Muhammad Aurangzeb called the deal "difficult but necessary" and warned Pakistanis to brace for electricity tariff increases of 18-22% and fuel price hikes as subsidy reforms begin. The government has also committed to privatising PIA, Pakistan Steel Mills and two state-owned banks.
The IMF disbursement of $1.1 billion is expected immediately, with the remainder released in quarterly tranches subject to performance reviews. The deal also unlocks a $1.5 billion package from Saudi Arabia and $800 million from the UAE, both of which had held back pending the IMF agreement.
India, which had abstained from the IMF vote on Pakistan's 2023 bailout, voted against this package citing concerns about Pakistan's use of previous IMF funds and its alleged support for cross-border terrorism. India's representative at the IMF called for "stricter conditionality and monitoring."
Economists are cautiously optimistic. "Pakistan has had 24 IMF programmes and completed only one successfully," said a former State Bank of Pakistan governor. "The question is not whether the IMF will disburse — it's whether Pakistan's political establishment has the will to implement the reforms."
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